World View & Market Commentary. Forest first; Trees second. Focused on Real & Knowable facts that filter through the "experts" fluff and media hyperbole. Where we've been, what the future may hold and developing a better way forward.

Wednesday, January 14, 2009

The market has deteriorated significantly. The DOW is currently off by 305 points, the XLF is down 5.6%, IYR is down 5%, the S&P is down 3.6%, and the RUT is down 4%.

That’s ugly.

And we just broke the 840 pivot on the SPX… that does open the door to a retest of the November lows, but does not eliminate a move back up until those November lows are broken – that’s a long ways down. Here’s a 3 month daily of the SPX, note that we are beneath the lower Bollinger band and oversold on the fast stochastic. It’s very dangerous to short the hole when the market is down this much already, so I am resigned to be disciplined and not do it here UNLESS we retest the 840 pivot and then fail, that would be okay as long as discipline is maintained and no loss is accepted by using the entry point or 840 as a stop (consider long play on break above?):

Next is a chart of the DOW daily. DOW 8,000 isn’t very far away. Be ware, until we break the November lows, we could still be in a corrective wave. Also, keep in mind that this is options expiration week and we’ve now had 6 down days in a row, which I note, the volume is increasing on:

Finally, let’s look at the VIX, definitely broken out higher, but it too is reaching the Bollinger and in this case is approaching overbought. Still, this is more than a wave 4, that means that what is labeled on this cart as 1-2-3 is probably an a-b-c and is over:

Here’s a P&F of the VIX showing the breakout higher and a new higher target of 80:

VIX:

All the major indices have broken down and produced lower targets, except the NDX is close but has not triggered a breakdown yet. Here are the charts, note the new price objectives. I use these charts to help identify breakout locations and to get initial targets. The DOW and Transports had broken down earlier and produced lower targets, but now those targets have been refined and are substantially lower: